New York Law Review

Tag: 1977

  • F.I. duPont, Glore Forgan & Co. v. Chen, 41 N.Y.2d 794 (1977): Validity of Service on Apartment Building Doorman

    F.I. duPont, Glore Forgan & Co. v. Chen, 41 N.Y.2d 794 (1977)

    Under CPLR 308(2), in certain circumstances, an apartment building doorman can be considered a person of suitable age and discretion at the actual dwelling place of a tenant, allowing for valid alternative service of process.

    Summary

    This case concerns the validity of serving a summons and complaint on an apartment building doorman as a form of alternative service under New York law. A process server attempted to serve a couple at their apartment but was repeatedly denied access by the doorman. The process server then left the documents with the doorman and mailed copies to the couple. The Court of Appeals held that, under the specific facts found by the referee, service on the doorman could be valid because the doorman prevented the process server from reaching the apartment. The court reasoned the doorman was a person of suitable age and discretion and the lobby, where the papers were left, could be considered the outer bounds of the “actual dwelling place” when access to the apartment is blocked.

    Facts

    A Deputy Sheriff attempted to serve a summons and complaint on William and Rosina Chen at their apartment building. On two occasions, he was allowed into the building but received no response at their apartment. On a third attempt, the doorman acknowledged the Chens had received the deputy’s message but refused to allow him to go to their apartment. The deputy then handed the doorman copies of the summons and complaint for each defendant and also mailed copies to the Chens at their apartment address.

    Procedural History

    The Chens moved to set aside the service. Special Term denied the motion based on a referee’s report. The Appellate Division reversed, granting the motion and dismissing the complaint. F.I. duPont, Glore Forgan & Co. appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether an apartment building doorman can be considered “a person of suitable age and discretion” under CPLR 308(2) for the purpose of alternative service of process.
    2. Whether the lobby of an apartment building can be considered “the actual dwelling place” of a tenant under CPLR 308(2) when the doorman prevents the process server from accessing the tenant’s apartment.

    Holding

    1. Yes, because under the specific facts found, the doorman functioned as a responsible communicator and was entrusted with screening callers and accepting messages.
    2. Yes, because when a process server is prevented from reaching the actual apartment by a building employee, the outer bounds of the dwelling place can extend to the location where the process server’s progress is stopped.

    Court’s Reasoning

    The court reasoned that the 1970 amendment to CPLR 308 significantly altered the requirements for personal service, introducing alternative service as a viable option. The court emphasized that the referee found the doorman had acted as a responsible communicator, informing the Deputy Sheriff that the Chens had received his message. The court stated that the doorman’s duties included screening callers, announcing visitors, and accepting messages and packages. Rejecting the argument that a “family relationship” was required, the Court deferred to the referee’s factual finding. Regarding the “actual dwelling place,” the court stated, “if a process server is not permitted to proceed to the actual apartment by the doorman or some other employee, the outer bounds of the actual dwelling place must be deemed to extend to the location at which the process server’s progress is arrested.” The Court further noted that the inference was available to the referee that the doorman’s refusal to permit the Deputy Sheriff to proceed to apartment 4A was attributable to the defendants. Thus, the Court held that the Appellate Division erred in reversing Special Term, and remitted the case back to the Appellate Division for a review of the facts, as it had erroneously reversed on the law.

  • Jamaica Tobacco & Sales Corp. v. Ortner, 398 N.Y.S.2d 865 (1977): Distinguishing a Guarantee from a Primary Obligation

    Jamaica Tobacco & Sales Corp. v. Ortner, 398 N.Y.S.2d 865 (1977)

    A writing described as a guarantee may actually constitute a primary agreement to pay one’s own debt if the writing reflects an intent to be directly responsible for purchases made on one’s own account.

    Summary

    Jamaica Tobacco & Sales Corp. sued Ortner to recover payment for goods. Ortner signed a document labeled a “guarantee” for credit extended to 91 East End Corporation. The court held that despite the label, the writing was actually Ortner’s agreement to pay for goods delivered to and used by Ortner. The court emphasized that the plaintiff’s business records showed the materials were delivered to Ortner’s address and credited to its account, and that Ortner admitted the goods were supplied and used at its construction project. Because the goods were supplied to Ortner and used for Ortner’s benefit, Ortner was primarily liable, and the mislabeling of the document did not alter that liability.

    Facts

    1. Jamaica Tobacco & Sales Corp. agreed to extend credit to Ortner if Ortner signed a “guarantee.”
    2. Ortner signed and returned the “guarantee,” which stated that Ortner guaranteed payment for any debt 91 East End Corporation had incurred or would incur.
    3. Jamaica Tobacco’s business records showed that materials were delivered to Ortner’s address and credited to Ortner’s account.
    4. Ortner admitted that the materials were supplied and used in a construction project at its premises.

    Procedural History

    The trial court found in favor of Jamaica Tobacco, holding Ortner liable for the debt. The Appellate Division affirmed the trial court’s decision. Ortner appealed to the New York Court of Appeals.

    Issue(s)

    Whether a document labeled a “guarantee” should be interpreted as a primary agreement to pay one’s own obligation when the evidence demonstrates that the goods were delivered to and used by the purported guarantor.

    Holding

    Yes, because the evidence established that the materials were delivered to the appellant’s address and credited to its account, and the appellant admitted that the materials were supplied and used in the construction project at its premises.

    Court’s Reasoning

    The court reasoned that despite being described as a guarantee, the writing was actually an agreement by Ortner to pay its own obligation for purchases made on its own account. The court relied on the case of Deeves & Son v. Manhattan Life Ins. Co., 195 N.Y. 324, 331, which supported the principle that such a writing can constitute an agreement to pay one’s own obligation. The Court emphasized that the plaintiff’s business records established that the materials were delivered to Ortner’s address and credited to its account. Furthermore, Ortner admitted at trial that the materials were supplied and used in the construction project at its premises. The court stated, “On this record we agree with the trial court that the evidence established appellant’s obligation to pay for the goods sold, delivered and credited to its account.” Therefore, the label attached to the document was not determinative; rather, the substance of the transaction established Ortner’s direct liability.

  • People v. Dlugash, 41 N.Y.2d 725 (1977): Criminal Liability for Attempt When Completion is Impossible

    41 N.Y.2d 725 (1977)

    A defendant can be convicted of attempted murder even if the victim was already dead when the defendant acted, provided the defendant believed the victim was alive at the time of the attempted act.

    Summary

    Melvin Dlugash was convicted of murder. The evidence showed that Dlugash shot Michael Geller multiple times in the head. Dlugash admitted to the shooting, but claimed Geller was already dead from prior gunshot wounds inflicted by another person, Joe Bush. The trial court instructed the jury on intentional murder and attempted murder. The Appellate Division reversed, finding insufficient evidence that Geller was alive when Dlugash shot him. The New York Court of Appeals modified the order, holding that even if Geller was dead, Dlugash could be guilty of attempted murder if he believed Geller was alive. The court reasoned that the Penal Law eliminates impossibility as a defense to attempt if the crime could have been committed had the circumstances been as the defendant believed them to be.

    Facts

    Michael Geller was found dead in his apartment, riddled with bullets. The autopsy revealed multiple gunshot wounds to the head and chest from different caliber weapons. Dlugash confessed to police that he, Geller, and Bush were together the night of the murder. Bush shot Geller after an argument. Dlugash then shot Geller in the head and face with a .25 caliber pistol. Dlugash stated that Geller looked dead at the time of his shots. Bush and Dlugash disposed of the weapons. Ballistics evidence confirmed that different guns were used.

    Procedural History

    Dlugash was indicted for murder by the Grand Jury of Kings County. At trial, the prosecution presented Dlugash’s confession and medical testimony that could not definitively determine if Geller was alive when Dlugash shot him. The defense presented expert testimony suggesting Geller could have died quickly from the initial chest wounds. The trial court declined to charge the jury on aiding and abetting but submitted intentional murder and attempted murder. The jury convicted Dlugash of murder. The Appellate Division reversed the conviction and dismissed the indictment, finding the prosecution failed to prove Geller was alive when Dlugash shot him, and that the uncontradicted evidence showed Dlugash believed Geller was dead. The People appealed to the New York Court of Appeals.

    Issue(s)

    Whether a defendant can be convicted of attempted murder when the target of the attempt may have already been dead, by the hand of another, when the defendant made his felonious attempt, but the defendant believed the target to be alive.

    Holding

    Yes, because under Penal Law § 110.10, it is no defense to a charge of attempt that the crime was factually impossible to commit if the crime could have been committed had the circumstances been as the defendant believed them to be.

    Court’s Reasoning

    The court acknowledged that the prosecution failed to prove beyond a reasonable doubt that Geller was alive when Dlugash shot him. Therefore, a murder conviction could not stand. However, the court analyzed whether Dlugash could be convicted of attempted murder. The court reviewed the historical distinction between factual and legal impossibility as defenses to attempt, noting that New York Penal Law § 110.10 eliminates the defense of impossibility in most situations, reflecting the Model Penal Code’s approach. The statute focuses on the actor’s mental state. The court found sufficient evidence for a jury to conclude Dlugash believed Geller was alive when he shot him. This evidence included the fact that Dlugash fired five shots at Geller’s head from close range, and his actions after the shooting indicated a consciousness of guilt. Dlugash’s admissions, particularly his cooperative actions in disposing of the weapons and providing a false alibi, contradicted his later claim of duress or belief that Geller was dead. While Dlugash argued the jury was bound to accept the exculpatory portions of his admission, the court stated the jury could reject those portions if they were improbable or contradicted by other evidence. The court found the Appellate Division erred in dismissing the indictment instead of modifying the judgment to reflect a conviction for attempted murder, a lesser-included offense. The case was remitted to the Appellate Division for review of the facts and further proceedings regarding the sentence.

  • Park v. Chessin, 400 N.Y.S.2d 950 (1977): Recovery for Emotional Distress and Expenses Related to a Child’s Birth Defect

    Park v. Chessin, 400 N.Y.S.2d 950 (1977)

    In a case of alleged medical malpractice for failure to diagnose a fetal defect, a cause of action may exist for the parents’ emotional distress and expenses related to raising the child with the defect, but the court did not reach the issue of whether a child can recover for wrongful life when the defendant’s failure to perform a test was within the permissible exercise of medical judgment.

    Summary

    The plaintiffs, parents of a child born with Cri-du-chat syndrome, sued the defendant doctors for medical malpractice, alleging that the doctors failed to perform an amniocentesis during pregnancy, which would have revealed the child’s chromosomal defect and allowed the parents to make an informed decision about terminating the pregnancy. The court declined to rule on the complex legal questions of whether parents can recover for emotional distress and the costs of raising a disabled child or whether a child can recover for “wrongful life” because the defendant’s actions were within the bounds of permissible medical judgment at the time.

    Facts

    The plaintiff mother consulted with the defendant doctors for genetic counseling during her pregnancy. The plaintiffs alleged that the defendants negligently failed to advise and perform an amniocentesis. The plaintiffs asserted that this procedure would have revealed that the child was afflicted with Cri-du-chat syndrome, a chromosomal defect causing severe physical and mental retardation. The parents claimed that if they had known about the defect, they would have obtained an abortion.

    Procedural History

    The lower court’s decision to dismiss the six causes of action was appealed. The Appellate Division affirmed the dismissal. The New York Court of Appeals reviewed the Appellate Division’s order.

    Issue(s)

    Whether the defendant’s failure to perform an amniocentesis constituted medical malpractice, considering the medical history of the patient and the state of medical knowledge in 1969 regarding the amniocentesis test, or was it instead a permissible exercise of medical judgment?

    Holding

    No, because the defendants’ failure to perform the test was a permissible exercise of medical judgment and not a departure from accepted medical practice at the time.

    Court’s Reasoning

    The Court of Appeals affirmed the dismissal, holding that the plaintiffs did not raise an issue of fact to counter the defendants’ evidence that their failure to perform the amniocentesis was within the bounds of permissible medical judgment. The court cited Pike v. Honsinger, 155 N.Y. 201, which establishes that a physician is not liable for negligence if they exercise their best judgment in applying their skill and knowledge. Because the defendants’ actions were deemed a permissible exercise of medical judgment based on the medical information available at the time (1969), the court did not address the broader legal questions presented by the case. The court stated, “our review of the record does not demonstrate that an issue of fact was raised by the plaintiffs in the face of the uncontroverted showing by the defendants that, on the basis of the patient’s medical history and the state of medical knowledge regarding the use of the amniocentesis test in 1969, the defendants’ failure to perform the test was no more than a permissible exercise of medical judgment and not a departure from then accepted medical practice”. The Court avoided deciding the novel issues concerning “wrongful life” and the extent of the duty owed by physicians in such circumstances, because the factual predicate for reaching those issues was absent.

  • Gelder Medical Group v. Webber, 41 N.Y.2d 680 (1977): Enforceability of Restrictive Covenants After Partner Expulsion

    Gelder Medical Group v. Webber, 41 N.Y.2d 680 (1977)

    A partner who has been expelled from a partnership pursuant to a valid partnership agreement containing a reasonable restrictive covenant may be held to that covenant, provided the expulsion was not unduly penal, an unjust forfeiture, overreaching, or a violation of public policy.

    Summary

    Gelder Medical Group sued to enforce a restrictive covenant against Dr. Webber, a former partner who was expelled from the group. The partnership agreement contained a clause allowing for expulsion without cause and a covenant barring any partner from practicing within 30 miles of Sidney, NY, for five years after leaving the group. The court affirmed the lower court’s decision to enforce the covenant, finding the agreement valid and the covenant reasonable, given the circumstances and the absence of bad faith or public harm. The court emphasized that partners have the right to choose their associates and that restrictive covenants are enforceable when reasonable in time and scope.

    Facts

    Dr. Webber, a surgeon, joined the Gelder Medical Group in Sidney, New York, after a one-year trial period. The partnership agreement included a provision for expulsion without cause and a restrictive covenant preventing partners from practicing within a 30-mile radius for five years after termination. Dr. Webber’s professional and personal conduct became problematic, causing embarrassment to the group and its patients. After attempts to address the issues failed, the partnership unanimously voted to terminate Dr. Webber’s association, paying him a settlement according to the agreement. Dr. Webber then resumed his practice in Sidney, violating the restrictive covenant.

    Procedural History

    The Gelder Medical Group sued Dr. Webber to enforce the restrictive covenant and obtained a temporary injunction. Dr. Webber filed a separate action for a declaratory judgment and damages, alleging wrongful expulsion. The two actions were consolidated. Special Term granted summary judgment to Gelder Medical Group, enforcing the covenant. The Appellate Division affirmed, and Dr. Webber appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether a partner expelled from a partnership under an agreement allowing expulsion without cause can be held to a restrictive covenant included in the partnership agreement.
    2. Whether the restrictive covenant is reasonable under the circumstances.

    Holding

    1. Yes, because the partnership agreement provided for expulsion without cause, and the terms of the agreement were not oppressive, penalized, overreaching, or a violation of public policy.
    2. Yes, because the covenant was reasonable in time and geographic scope, necessary to protect the Gelder Medical Group’s legitimate interests, not harmful to the public, and not unduly burdensome to Dr. Webber.

    Court’s Reasoning

    The court reasoned that covenants restricting a physician’s right to compete are generally acceptable if reasonable in time and area, necessary to protect legitimate interests, not harmful to the public, and not unduly burdensome. The court found the Gelder Group’s restrictive covenant met these criteria, noting the group’s long-standing presence in Sidney and the investment made in its development. The court emphasized that partners have the right to choose with whom they associate. The court acknowledged that while bad faith on the part of the remaining partners might nullify the right to expel a partner, Dr. Webber failed to demonstrate any evil, malevolent, or predatory purpose in his expulsion. The court stated, “When, as here, the agreement provides for dismissal of one of their number on the majority vote of the partners, the court may not frustrate the intention of the parties at least so long as the provisions for dismissal work no undue penalty or unjust forfeiture, overreaching, or other violation of public policy.” The court also observed that enforcing the covenant would not harm the public, as other physicians and surgeons were available in the area. The court implicitly relied on the principle of freedom of contract, stating that there is an implied term of good faith in every contract.

  • Jack L. Inselman & Co. v. FNB Financial Co., 41 N.Y.2d 1078 (1977): Tortious Interference Requires Breach of Contract

    Jack L. Inselman & Co. v. FNB Financial Co., 41 N.Y.2d 1078 (1977)

    A claim for tortious interference with a contract requires proof that the defendant’s actions caused the contracting party to breach the contract.

    Summary

    Jack L. Inselman & Co. sued FNB Financial Company for tortious interference with a contract Inselman had with Guilford Industries. FNB had a factoring agreement with Guilford, guaranteeing certain accounts receivable. Inselman’s credit limit with Guilford was exhausted, and Guilford demanded cash payment for further deliveries, as per their contract. Inselman refused and claimed the contract was canceled. FNB then purchased the goods from Guilford. The New York Court of Appeals held that because Guilford did not breach its contract with Inselman, a necessary element for tortious interference was missing, and dismissed Inselman’s claim.

    Facts

    Guilford Industries and Inselman had contracts for the sale of fabric, with credit terms allowing Guilford to demand cash payment if Inselman’s credit limit was exhausted. Guilford had a factoring agreement with FNB, guaranteeing Guilford’s accounts receivable from credit-approved purchasers, including Inselman, up to $60,000. Inselman purchased $54,300.18 worth of fabric on credit, depleting most of its credit line. Guilford manufactured additional goods worth $76,273.75 but, because FNB refused to extend further credit approval to Inselman, Guilford demanded cash payment before delivery, consistent with the terms of their contract. Inselman refused to pay cash and insisted on immediate delivery on credit. Guilford rejected Inselman’s demand. Subsequently, FNB purchased the goods from Guilford.

    Procedural History

    Inselman sued FNB for tortious interference with its contract with Guilford. FNB counterclaimed for damages resulting from Inselman’s refusal to repurchase the goods and for outstanding invoices assigned to it by Guilford and another company. Special Term denied FNB’s motion for summary judgment dismissing Inselman’s complaint and for judgment on its counterclaims. The Appellate Division reversed, dismissed Inselman’s complaint, and granted judgment on FNB’s counterclaims. Inselman appealed to the New York Court of Appeals.

    Issue(s)

    Whether FNB’s refusal to extend further credit to Inselman, resulting in Guilford’s demand for cash payment as per their contract, and FNB’s subsequent purchase of the goods from Guilford, constituted tortious interference with the contract between Inselman and Guilford.

    Holding

    No, because a cause of action for tortious interference with a contract requires a breach of that contract by the other party, and no such breach occurred here.

    Court’s Reasoning

    The Court of Appeals reasoned that Guilford was entitled to demand cash payment from Inselman once Inselman exhausted its line of credit, as per the credit terms of their agreement. FNB was within its rights to refuse extending further credit and demanding payment of outstanding invoices. FNB’s subsequent purchase of the goods occurred after Inselman had repudiated the contract. The court emphasized that a breach of contract is an essential element of a claim for tortious interference, citing Israel v Wood Dolson Co, 1 NY2d 116, 120; Campbell v Gates, 236 NY 457; and Lamb v Cheney & Son, 227 NY 418. Because Guilford did not breach the contract, Inselman’s claim for tortious interference failed. The court affirmed the dismissal of the complaint and the granting of summary judgment on FNB’s counterclaims, as there was no dispute of liability. The court stated, “In order for the plaintiff to have a cause of action for tortious interference of contract, it is axiomatic that there must be a breach of that contract by the other party…a situation not here present. An essential element of the case against FNB, then, is a breach by Guilford. No such breach had occurred and thus the complaint was properly dismissed.”

  • Smith v. State of New York, 41 N.Y.2d 1063 (1977): Timely Filing Requirement in Wrongful Death Claims Against the State

    Smith v. State of New York, 41 N.Y.2d 1063 (1977)

    A wrongful death claim against the State of New York must be filed by a duly appointed representative of the decedent’s estate within two years of the decedent’s death, and failure to do so constitutes a jurisdictional defect.

    Summary

    Virginia Ann Smith’s claim against the State of New York for the wrongful death of Robert Charles Kruseck, Sr., was dismissed because it was not timely filed by a proper representative. Kruseck drowned while rescuing Smith’s daughter on state land. Smith initially filed a claim as the guardian of Kruseck’s son, then in her individual capacity. After the two-year statute of limitations expired, she was appointed administratrix and filed an amended claim. The Court of Appeals held that because the original claims were invalid and the amended claim was filed after the statute of limitations, the Court of Claims lacked jurisdiction, and the State’s motion for summary judgment should have been granted.

    Facts

    On August 17, 1973, Robert Charles Kruseck, Sr., drowned while rescuing Virginia Ann Smith’s daughter from a pond on land recently acquired by the State through condemnation.
    On November 7, 1973, Smith filed a notice of claim as the parent and natural guardian of Kruseck’s son.
    On September 30, 1974, Smith filed a claim in her individual name.
    On May 22, 1975, Smith moved to amend the claim to reflect her status as the mother and natural guardian of Kruseck’s son.

    Procedural History

    Smith filed a claim in the Court of Claims.
    The State cross-moved for summary judgment, arguing Smith lacked standing because she wasn’t the appointed administratrix of Kruseck’s estate.
    Smith was appointed administratrix on September 10, 1975, and filed an amended claim.
    The Court of Claims denied the State’s motion for summary judgment.
    The Appellate Division reversed, granting the State’s motion.
    The Court of Appeals affirmed the Appellate Division’s order.

    Issue(s)

    Whether a wrongful death claim against the State is valid when filed by a claimant who is not a duly appointed representative of the decedent’s estate within the two-year statute of limitations prescribed by the Court of Claims Act § 10(2)?

    Holding

    No, because the Court of Claims Act requires that such claims be filed by an executor or administrator within two years of the decedent’s death, and failure to comply with this requirement is a jurisdictional defect.

    Court’s Reasoning

    The Court relied on Court of Claims Act § 10(2), which explicitly requires that wrongful death claims be filed by the executor or administrator of the decedent’s estate within two years of the death. The court emphasized that “A claim for wrongful death against the State can only be filed by a proper representative of the decedent, and the statute requires that the claim be filed within two years after the death of the decedent.”
    The Court noted that Smith was not appointed administratrix until after the two-year statute of limitations had expired. Despite the State providing express notice of the statutory requirements three months before the deadline, Smith failed to obtain the appointment in time.
    The Court stated, “Inasmuch as timeliness of filing is a jurisdictional prerequisite to making a claim and in this instance no legally sufficient claim was timely filed, the State’s motion for summary judgment should have been granted.”
    The Court cited Lewis v. State of New York, 26 A.D.2d 878, aff’d, 25 N.Y.2d 881, to support the principle that strict compliance with the statutory filing requirements is essential for maintaining a claim against the state.

  • Marine Midland Bank-New York v. Graybar Electric Co., 41 N.Y.2d 703 (1977): Bank’s Holder in Due Course Status and Setoff Rights

    Marine Midland Bank-New York v. Graybar Electric Co., 41 N.Y.2d 703 (1977)

    A bank does not become a holder in due course of a check merely by giving a provisional credit for the check and then unilaterally applying that credit to a debt owed to the bank when the credit is later reversed due to a stop payment order.

    Summary

    Marine Midland Bank sought to recover from Graybar Electric on a check Graybar had issued to Dynamics Corp. The bank had provisionally credited Dynamics’ account for the check and then set off the balance against Dynamics’ debt to the bank. Graybar stopped payment on the check. The court held that the bank was not a holder in due course because it had only given provisional credit, and therefore could not recover from Graybar. The court emphasized that a bank’s unilateral application of provisional credit does not constitute giving value under the UCC, especially when the credit is later reversed.

    Facts

    Dynamics Corp. had loans from Marine Midland Bank. In July 1972, Dynamics requested an extension on a $4,420,000 note, which the bank refused. The bank informed Dynamics it would set off balances in Dynamics’ accounts against the debt. Among the items deposited in Dynamics’ account on July 28, 1972, was a check from Graybar Electric for $137,989.47 payable to Dynamics’ Waring Products Division. The bank forwarded the check for payment, but Graybar had issued a stop payment order on July 31, 1972. Graybar subsequently issued a replacement check for a lesser amount. The bank then sued Graybar to collect on the original check, asserting holder in due course status.

    Procedural History

    The bank sued Graybar in Special Term, seeking payment on the check as a holder in due course. Graybar interpleaded Dynamics. Special Term denied the bank’s motion for summary judgment, dismissed its complaint, denied Graybar’s request for discharge, and denied Dynamics’ cross-motion. The Appellate Division affirmed. The Court of Appeals affirmed, but on different grounds than the lower courts.

    Issue(s)

    1. Whether a bank is entitled to set off a check payable to its customer, deposited in an account with the bank, against that customer’s indebtedness to the bank when a stop payment order is placed on the check?

    2. Whether a bank that provisionally credits a customer’s account for a check and then sets off the balance against the customer’s debt becomes a holder in due course, thus precluding a stop payment order?

    Holding

    1. No, because under the circumstances, the bank did not become a holder in due course.

    2. No, because the provisional credit given by the bank did not constitute “value” under the Uniform Commercial Code, and the bank’s unilateral action did not elevate the transaction to the level of those instances where value is considered to be given.

    Court’s Reasoning

    The court reasoned that while a bank generally has the right to set off a borrower’s accounts against matured indebtedness, setting off on the day the loan is due is premature. However, the crucial point was whether the bank gave value for the check. The bank argued it gave value by acquiring a security interest in the check when it applied the credit to Dynamics’ debt. The court disagreed, finding the credit was provisional and reversed upon notice of the stop payment order. The court distinguished this situation from cases where the bank actually extinguishes the debt. “To say that the bank was doing something of advantage to Dynamics by applying the credit to that depositor’s indebtedness is to ignore what actually occurred. The bank was merely seeking to protect itself and not giving value, in any traditional sense, or under the Uniform Commercial Code.” Since the bank did not give value, it could not be a holder in due course and therefore could not recover on the check. The court emphasized that its determination was based on the conclusion that what the bank did was merely give a provisional credit for the Graybar check. “That the bank unilaterally agreed to apply this provisional credit to Dynamics’ indebtedness should not elevate the transaction to the level of those instances where value is considered to be given under the Uniform Commercial Code.” Therefore, since the bank did not give value, it is not a holder in due course and cannot recover on the check.

  • George Reiner & Co., Inc. v. Schwartz, 41 N.Y.2d 648 (1977): Establishing Personal Jurisdiction Based on a Single Business Transaction

    George Reiner & Co., Inc. v. Schwartz, 41 N.Y.2d 648 (1977)

    A non-domiciliary who is physically present in New York and enters into a contract, thereby establishing a continuing relationship with a New York corporation, is subject to personal jurisdiction in New York for causes of action arising from that contract.

    Summary

    George Reiner & Co. sued Arnold Schwartz for violating his employment contract. Schwartz, a Massachusetts resident, argued New York lacked personal jurisdiction. The Court of Appeals held that by traveling to New York, interviewing for a job, and entering into an employment agreement with a New York company, Schwartz purposefully availed himself of the privilege of conducting activities within New York, thus establishing personal jurisdiction. This single transaction was sufficient because it created a continuing relationship and the lawsuit arose directly from that agreement.

    Facts

    Arnold Schwartz, a Massachusetts resident, responded to an advertisement by George Reiner & Co., a New York corporation. At the company’s request and expense, Schwartz traveled to Albany, New York, for an interview. An employment agreement was reached, and Schwartz returned to Massachusetts with a memorandum outlining his sales territory (New England), commission rate, and other employment details. Schwartz worked for Reiner for over four years, covering New England from his Massachusetts home office. Reiner later sued Schwartz, alleging he fraudulently violated the contract by retaining excess drawings over commissions.

    Procedural History

    Reiner sued Schwartz in New York. Schwartz moved to dismiss the action for lack of personal and subject matter jurisdiction. Special Term granted the motion based on lack of personal jurisdiction. The Appellate Division reversed and reinstated the complaint. The New York Court of Appeals granted leave to appeal and certified the question of whether Special Term erred in dismissing the case for lack of personal jurisdiction.

    Issue(s)

    Whether a non-domiciliary, by traveling to New York for a job interview and entering into an employment contract with a New York corporation, transacts business within New York sufficient to establish personal jurisdiction under CPLR 302(a)(1) for a cause of action arising from that contract.

    Holding

    Yes, because by purposefully coming into New York to seek employment, interviewing, and entering into an agreement with a New York employer that contemplated and resulted in a continuing relationship, the defendant availed himself of the privilege of conducting activities in New York, thus invoking the benefits and protection of its laws.

    Court’s Reasoning

    The Court relied on the principle established in International Shoe Co. v. Washington, which requires minimum contacts with the forum state such that maintaining the suit does not offend traditional notions of fair play and substantial justice. The court emphasized that CPLR 302(a)(1) allows for personal jurisdiction over a non-domiciliary who transacts any business within the state, as long as the cause of action arises from that transaction. The Court determined that Schwartz’s physical presence in New York to negotiate and enter into the employment contract constituted the transaction of business within the state. The court stated that this was the “clearest sort of case” for jurisdiction, as the contract, which established a continuing relationship, was made in New York, and the cause of action arose directly from that contract. The court distinguished this case from McKee Elec. Co. v. Rauland-Borg Corp., where the defendant’s contact with New York was a casual attempt to smooth out difficulties, not the purposeful creation of a contractual relationship. The court emphasized that Schwartz “purposefully availed himself of the privilege of conducting activities, in our jurisdiction, thus invoking the benefits and protection of our laws.”

  • Pleasant Valley Home Construction, Ltd. v. Van Wagner, 41 N.Y.2d 1028 (1977): Zoning Board’s Denial of Special Use Permit Based Solely on Community Opposition is Impermissible

    41 N.Y.2d 1028 (1977)

    A zoning board’s denial of a special use permit for a use specifically contemplated and permitted by the zoning ordinance is impermissible if the denial is based solely on generalized community opposition rather than on specific, supportable findings that the proposed development fails to meet the ordinance’s criteria.

    Summary

    Pleasant Valley Home Construction sought a special use permit to develop a mobile home complex in an area zoned for such use. The Zoning Board of Appeals denied the permit, citing community opposition. The Court of Appeals held that the denial was impermissible. Because the zoning ordinance contemplated and permitted mobile home developments, the board could not deny the permit solely based on the undesirability of more mobile homes in the area. While the board retains discretion to evaluate permit applications against specific criteria, it cannot bow to generalized community pressure against a permitted use. The court affirmed that the board could impose reasonable conditions on the permit to mitigate any adverse effects of the development, but it could not deny the permit outright based on public opposition alone.

    Facts

    Pleasant Valley Home Construction, Ltd. applied for a special use permit to construct a mobile home complex within the Town of Pleasant Valley. The proposed site was located in an area where the town’s zoning ordinance permitted mobile home developments. The Zoning Board of Appeals denied the application.

    Procedural History

    The applicant appealed the Zoning Board’s denial. The Appellate Division granted leave to appeal to the Court of Appeals. The Court of Appeals affirmed the lower court’s decision, which had likely annulled the Zoning Board’s denial.

    Issue(s)

    Whether a zoning board may deny a special use permit for a use contemplated and permitted by the zoning ordinance solely on the basis of generalized community opposition to that use, rather than on specific findings related to the ordinance’s criteria.

    Holding

    No, because the zoning ordinance contemplates and permits mobile home development, the zoning board is estopped from denying a special permit solely because more mobile homes in the area would be undesirable. The denial of the application was impermissible as it was based primarily on community pressure rather than specific objections to the proposed development’s compliance with the zoning ordinance criteria.

    Court’s Reasoning

    The Court of Appeals reasoned that because the town’s zoning ordinance already designated mobile home developments as a permissible use within the specified zone, the zoning board’s discretion was limited. The board could not deny a special use permit simply because the community opposed further mobile home development in general. The court distinguished between denying a permit based on legitimate concerns about a specific project’s failure to meet the ordinance’s requirements and denying it solely because of generalized opposition to the permitted use itself. The Court cited North Shore Steak House v. Board of Appeals, noting that the ordinance itself reflects a legislative determination that the use is acceptable. However, the court emphasized that zoning boards retain the authority to impose “authentically reasonable conditions” on the permit to minimize any adverse effects on the surrounding community. The court explicitly stated, “On the entire record in this case, however, it is evident, despite the reasons assigned by the Board of Appeals, that petitioner’s application was denied not because of any objection peculiar to the proposed development, but because of community pressure directed against allowing any additional mobile home development in the area zoned for mobile homes.” This made the denial impermissible and subject to annulment.